Credit cards can be powerful financial tools if used wisely. They offer convenience, rewards, and can even help build your credit score. However, misuse can lead to spiraling debt and a damaged credit score. Mastering your credit card usage is about finding the balance between leveraging the benefits and avoiding the pitfalls.

If you are new to credit cards, you may be surprised to see that you can start your credit journey at 18 – the minimum age requirement for getting your first card.

It is important to understand the difference between what you “want” and what you “need”. Everything that you want is not necessarily everything that you need. Therefore, it is important to address your needs and not your wants. Use the credit card as a temporary loan to yourself, and then pay back the amount as soon you can to avoid interest charges. Frivolous purchases, which are not essential for your life can be considered as wants.

Here are some tips to master your credit card without wrecking your credit score:

• • Know your credit limit: A credit limit is the maximum amount of money that you can borrow on your card. Exceeding your limit can negatively impact your credit score. If your credit limit is Rs.1,00,000 then you can spend anything within your limit.

• • Track your Credit Utilization Ratio: Continuing the previous example, now that your credit limit is Rs.1,00,000 you should ideally not spend more than Rs.30000 to 40000. A credit utilization ratio of 30-40% will help you maintain a good credit score.

• • Pay your credit card bills on time: Securing timely payment for your credit card bills is a crucial element in maintaining a positive credit score and avoiding late fees and interest charges. The repercussions of late payments extend to significant impacts on your credit score, potentially posing challenges in qualifying for future loans or credit cards. Consider establishing automatic payments or setting reminders to settle your bill on or before the due date. By consistently settling your credit card bills promptly, you can uphold a robust credit score and construct a positive credit history.

• • Avoid paying only the minimum amount due on your credit card: When someone is not able to pay off their dues entirely, they feel that paying off just the minimum amount will solve the problem at that time. This is a myth and you have just put yourself in a huge problem. The interest rates charged on the remaining amount can be as high as 40% which will make it even more difficult for you to service the loan, thus reducing your credit score and impacting your credit report negatively.

• Do not close all your previous credit cards: If you have more than one Credit Card that you do not use, then you should not close any of the earlier cards. Make sure that you use it responsibly for purchases and ensure timely payment of the bills; because paying your credit card dues on time is a good sign…. this will help you build a rich credit history and increase your credit score with time.

By following the above-mentioned tips, individuals can use their credit cards wisely as a financial tool and maintain a good credit history that will help them in the future to maintain a good credit score and for easy approval of credit in the future.

Remember…. Credit Card is not free money; it is still a loan – a very high-cost loan!